Construction of new homes and apartments in the United States fell in June to the lowest level since October following the expiration of a government tax incentive, the Commerce Department said on Tuesday.

Housing starts in June dropped 5 percent from a month earlier to a seasonally adjusted annual rate of 549,000, the department said in its monthly report. Economists had forecast starts would fall to a 577,000 annual rate.

May's figure was also revised downward to a 578,000 pace from the previously estimated rate of 593,000.

However, applications for building permits, an indicator of future activity, recorded a 2.1-percent increase in June from a month earlier to an annual rate of 586,000.

Economists say that the consecutive decline in housing starts in May and June was in large part due to the expiration of a government tax incentive, under which new home buyers could take advantage of tax credits of up to 8,000 dollars. The policy expired on April 30.

Meanwhile, housing starts were also hit by a surging supply of foreclosed properties and a sluggish job market.

The collapse of the housing bubble triggered the global financial crisis that plunged the U.S. economy into recession in December 2007.